There are several things that business owners need to learn about their accounting software early on in their business says Edmonton bookkeeping. That will help them have the most accurate and up-to-date financial statements possible.
It is extremely important that entrepreneurs have the most accurate and up-to-date financial statements. Because these the documents they are going to use to help them make informed financial decisions in their business.
In fact, Edmonton bookkeeping recommends that entrepreneurs review all of their financial statements are making any financial decision. Whether that is paying bills, running payroll or making asset purchases.
So that they understand the financial state of their business. And not only how much money they have to use. But what their debt servicing is. So that they can decide if they have the finances to make those decisions.
Or if they need to engage in some revenue-generating activities. Such as sales calls, or collection calls to bring more money into their business. The sooner an entrepreneur can have the most accurate financial statements.
The sooner an entrepreneurs financial decisions will be better. And can help them avoid spending more money than they have in their business.
One mistake that many entrepreneurs make when they are brand-new in business says Edmonton bookkeeping. Is thinking that they can look at their bank statement and understand how much money they have in their business to use.
What they will not see in their bank balance, are all of the payments that they have scheduled to come out. This includes checks that they have written, but have not been cashed by their vendors.
As well as all of the electronic fund transfers that they have scheduled. And if an entrepreneur looks at their bank balance in thinks that they can spend all the money in the account. They might end up making critical errors. In spending more money than they actually have to use.
Which is why it is extremely important for entrepreneurs to look at their financial statements. Because these will show exactly how much money in entrepreneur has in their business while taking all of the payments that they have scheduled into account.
As well as show an entrepreneur what they currently owe. So that they can decide if they have the money to be able to pay those bills. Or if they have the money to run payroll. And if they do not, they can make a plan on what they are going to do to ensure they have that money.
Because this is so important, Edmonton bookkeeping recommends that entrepreneurs understand what a tax payable account is. These are all of the various accounts that keep track of all of the taxes that an entrepreneur pays.
Many accounting programs default tax payments to the businesses payable account. And this is not when this is actually a corporate expense.
Therefore, any time an entrepreneur is paying a tax, it should go into a tax payable account. So that they know what taxes they have paid. And how much they paid by the end of the year.
What can we clear-up about Edmonton Bookkeeping for you?
Learning how to do some of their own bookkeeping can help an entrepreneur have the most up-to-date financial statements says Edmonton bookkeeping. And the sooner an entrepreneur can learn how to do this. The more informed they will be about the finances in their business.
However, many entrepreneurs make mistakes when it comes to the tax payable and tax expense accounts of their business. Mostly because they do not understand that tax payments should go in the separate account. Instead of in their businesses payable account.
But also, they end up making mistakes. Because they put all of their tax payments into one tax payable account. Instead of all of the separate taxes that they must pay.
In Alberta, business owners have to pay their provincial taxes and their federal taxes separately says Edmonton bookkeeping. This is incredibly poor and to note. Because other provinces in Canada do not keep these taxes separate.
In fact, entrepreneurs will send both their provincial and federal taxes to Canada revenue agency. Who will send the provincial taxes onto the province on behalf of the business.
By understanding that they must keep these taxes separate. Can help an entrepreneur understand that they would have a federal and provincial tax payable account.
Every time they make a payment. They should understand which tax they are paying. So that they can enter the correct amount into the correct account.
However, those are not the only two taxes that entrepreneurs responsible for says Edmonton bookkeeping. And so they should understand all of the different tax payable accounts that they need to have.
Even though GST is a federal tax. It has its own tax payable account. Especially because it is calculated differently than their federal taxes.
Then, an entrepreneur must take into consideration all of the taxes that come from their payroll. Not just the income tax, CPP and EI. But the employer and employee portion of CPP and EI must be accounted for.
Therefore, a business owner should understand that they can have up to eight different tax payable accounts. Which is the reason why it is important that they keep each of their taxes separate.
As they pay each of the taxes, the tax expense account that they have will decrease. Until they have paid it all off, and the balance is zero.
However, a business owner needs to keep in mind that they should be paying their taxes in instalments. Even if the tax expense account is zero.
The reason why, is because their taxes are calculated by their accountant at the end of the year. And if they pay their tax expense account to zero. By continuing to pay instalments.
A business owner is paying the current years taxes. So when their accountant calculates the taxes that they owe at their next corporate year-end.
They will already have paid a lot of those taxes to the government. Decreasing the total amount that they will owe and therefore have to pay.